Stripe — Understanding the thought process of Patrick Collison

On a weekly basis, I listen to many different sources panning for a couple golden nuggets of information. In this piece, I’d like to introduce one source of brilliance: Patrick Collison, the 29 year old Irish of the widely unknown little billion dollar electronic payment company… called Stripe.

The value of startups don’t lie in the product, they lie in the type of people that work there.

Collison stresses that the traits found at start ups (hard working, clever, creative) are typically different than those traits (bureaucratic, stable) found at large corporations . This difference in traits is the exact reason they are so attractive to large corporations. To me and I think to many others in Silicon Valley, we have this misconception that the value of the company comes just from the product rather than the people who make the product.

The value of the startup lies in the future cash flow.

Valuations have little to do with current performance and everything to do with future growth in the next 20 years. This is why in order to build a truly successful company, this requires developing a culture that will not rest on its laurels (for at least 20 years). I’ve heard this before but it never really hit home until I saw this chart (Source). Assuming a 15% discount rate and a 20% growth rate, less than 10% of a companies value comes from it’s current profit.

The value of the startup lies in its potential to become a monopoly

Investors are looking for companies that provide value. The best way to provide value is often by reducing your competition and sequentially increasing your profit margins. However reducing competition is not the only way to increase value. It also means suppressing buyer and supplier power (Porter’s 5 Forces).

Programming as a mix between a science and an art.

You can’t just give someone a lot of money and they will return a piece of brilliance... Example Juicero. You can however give someone a lot of money and they can invest in an index fund and return 8% on average… Example VFIAX.

“Challenges don’t get easier — you just get better and faster at solving them”

Deep.